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Would a universal basic income in the U.S. reduce inequality?

A universal basic income may be a better alternative than raising the minimum wage or trying to get businesses to pay low-wage workers more, says Robert Bruno, a professor of labor and employment relations at the Urbana campus of the University of Illinois and the director of the Labor Education Program in Chicago.

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The idea of universal basic income – that is, Uncle Sam paying everyone $10,000 per year – has come back in vogue among economists and policymakers. Robert Bruno is a professor of labor and employment relations at the Urbana campus of the University of Illinois and the director of the Labor Education Program in Chicago. Bruno, who has testified on labor issues before the education and workforce committee of the U.S. House of Representatives, spoke with News Bureau business and law editor Phil Ciciora about the renewed interest behind a guaranteed basic income for all.

Would a universal basic income in the U.S. reduce inequality?

If everyone had $10,000 deposited annually into a bank account, that would certainly help the person working full-time at a minimum wage job. They go from making around $15,000 per year to $25,000. And if they’re married to someone who also works a full-time minimum wage job, and have one or two kids, as a household, they go from making $30,000 per year to $50,000. So they’re essentially lifted into the bottom half of the middle class with the help of the government, which is unquestionably good.

But what does it say about the health of 21st-century capitalism when the government needs to provide two out of every five dollars of a dual-earner family’s income so it can barely qualify as middle class?

This phenomenon isn’t confined to the U.S. It’s happening in capitalist countries all over the world where there has been stagnation and austerity. There was a recent ballot measure about a universal basic income in Switzerland. It was voted down, but but you could make the argument that they already have a pretty good standard of living, and maybe their form of capitalism isn’t as brutal as the version here in the U.S.

When working-class people earn more money, they spend more money. Workers are also consumers. They drive the economy. So if capitalism is going to sustain itself, it needs them to keep spending. The system needs the working class to generate enough wealth so that the system gets out of crisis.

I look at a universal basic income as a better alternative than raising the minimum wage or trying to get businesses to pay their low-wage workers more, which can result in hiring fewer workers or cutting back hours. Even if you think a universal basic income isn’t the best mechanism to make work pay again, we have to do something.

Where did the idea of a universal basic income come from?

It isn’t a new idea, that’s for sure. We can go back to Milton Friedman, who came up with the idea of a negative income tax, which evolved into the earned income tax credit. Richard Nixon had a family assistance plan. George McGovern, who ran for president in 1972, had his own idea of a guaranteed income for all adults based on family size.

For conservatives, the idea was that, with a negative income tax, you could get rid of a lot of welfare programs that, from their perspective, disincentivized work. So they would cut down the social safety net – Social Security, Medicare and Medicaid, the food stamps program, et al – in exchange for a monthly or annual chunk of cash and say, “You’re on your own.” I don’t agree with that. I think we need both: the safety net and a basic livable income. The U.S. can certainly afford both.

One of the reasons why it’s gaining currency again is that global capitalism is in turmoil. The fundamental idea was that you were building an economy on the basis that work paid. That work was a ladder to prosperity. Through hard work, people could move from poverty into the middle class, and you could create economic opportunity through employment opportunities. That you could work 40 hours per week and not be poor.

Since 2007, global economic growth has been tepid. Historically, the middle class in the U.S. has flourished when the economy was growing annually at a 3 to 4 percent clip. We haven’t seen that kind of year-over-year growth in a long time. That raises serious questions as to whether employment is still the primary pathway to economic prosperity, a middle-class life and a sound and stable democracy.

Another reason why is because the labor movement in the U.S. isn’t strong enough to push wages up.

We could get into the weeds of policy proposals, but the core issue is that the work-based system of generating prosperity just isn’t working. The U.S. was built on the promise that work pays. But even though productivity and corporate profits are way up, wages are stagnant. Of course, there are exceptions. But for the vast majority of people, work doesn’t pay anymore.

I place universal basic income in the context of a kind of economic desperation that requires looking deeper at systemic problems. At the root of it is that we simply undervalue labor. So, workers need a supplement.

Things like universal basic income are coming back because we see a serious failure of the ability to generate broadly distributed wealth. If we’re not going to put people to work, or at least pay people middle-class wages, then capitalism needs a government bailout.